INTERNATIONAL. Global investors have raised their holdings of cash significantly in response to a weaker global economic outlook, particularly in China, according to the BofA Merrill Lynch Fund Manager Survey for July.
Overall, equity allocations are unaffected by the higher risk aversion, however.
• Confidence in the global economy falls sharply: 42percent of investors expect strengthening over next year, down from 55 percent a month ago.
• China heads concerns: net 62 percent expect economy to weaken in next 12 months, eight out of 10 see GDP below 6 percent by 2018.
• Cash levels soar to highest level since 2008 crisis – 5.5 percent of portfolios; gold judged undervalued for first time in five years.
• Increased pessimism on China led further weakness in assets linked to China: Commodity allocation drops to six-month low, and Global Emerging Market equities stays as most unloved region with allocations at 16-month low.
• Bonds still seen as much more over-valued than equities and more at risk of volatility-driven crash; equity overweights rise to net 42 percent.
• U.S. dollar bullishness strengthens despite postponing of expected US rate rise to Q4 2015 or later, replacing June consensus of Q3.
• Appetite to overweight European stocks rises although potential Eurozone breakdown now biggest “tail risk.”
“Rising risk aversion and stretched cash levels provide a contrarian buy signal for risk assets in Q3,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
“Despite the Greek newsflow, intention to own European assets is high and rising, though global growth remains vitally important for European stocks,” said Manish Kabra, European equity strategist.
Fund Manager Survey
An overall total of 191 panelists with US$510 billion of assets under management participated in the survey from 2 July to 9 July 2015. A total of 149 managers, managing US$399 billion, participated in the global survey. A total of 90 managers, managing US$196 billion, participated in the regional surveys.
The survey was conducted by BofA Merrill Lynch Global Research with the help of market research company TNS. Through its international network in more than 50 countries, TNS provides market information services in over 80 countries to national and multi-national organizations. It is ranked as the fourth-largest market information group in the world.
BofA Merrill Lynch Global Research
The BofA Merrill Lynch Global Research franchise covers nearly 3,400 stocks and 1,200 credits globally and ranks in the top tier in many external surveys. Most recently, the group was named Top Global Research Firm of 2014 by Institutional Investor magazine; No. 1 in the 2015 Institutional Investor All-Europe Fixed Income Research survey; No. 1 in the 2014 Institutional Investor All-Europe survey; No. 1 in the Institutional Investor 2015 Emerging EMEA Survey; No. 2 in the 2015 Institutional Investor All-Asia survey; and No. 2 in the 2014 Institutional Investor All-America survey. The group was also named No. 2 in the 2015 All-China survey and No. 2 in the 2014 All-America Fixed Income survey for the third consecutive year.
Photo Caption: Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
Bank of America
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